TECH - Fed Indicates One Rate Cut in 2024: 5 Long-Term Picks | Benzinga
On Jun 12, in his post-FOMC meeting statement, Fed Chairman Jerome Powell indicated just one cut of 25 basis points in the Fed fund rate in 2024. This is a significant reduction from three rate cuts for 2024, as hinted in the March FOMC meeting.
Consequently, the terminal rate of the benchmark lending rate increased to 5.1% this year instead of 4.6% projected in March. The Fed kept the existing interest rate range of 5.25-5.5% intact, and, the statement regarding inflation was almost the same.
The post-meeting statement said, "Inflation has eased over the past year but remains elevated." The only change is that the new statement mentioned, "In recent months, there has been modest further progress toward the Committee's 2% inflation objective." The previous statement was "a lack of further progress" on inflation.
Meanwhile, a single 25 basis point rate cut this year was not bad news for Wall Street. A large section of economists and financial experts have already been pricing in no rate cut this year in stock market valuations.
Moreover, the latest "dot-plot" of the FOMC meeting hinted at a full 1% rate cut across 2025. Consequently, the terminal rate of the Fed fund rate currently stands at 4.1% by the end of 2025.
However, the Fed's projection for long-term interest rate (a benchmark that neither boosts nor restricts growth) increased to 2.8% from the 2.6% forecast earlier. It shows that Fed officials are more inclined toward a "higher interest rate for longer" view.
At this stage, investors should think from a long-term perspective. The Fed is undoubtedly approaching the end of the higher rate regime. We may witness a rate cut at the end of this year if macro-economic data remains favorable.
Therefore, investors should accumulate equities using a buy-on-the-dip strategy. Every dip in stock prices will be a good purchasing point in order to gain handsomely once the Fed's tighter monetary control comes to an end.
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